Balrampur Chini stock hits 7-month high; jumps 4% on positive outlook

Higher sugar realization and better feedstock mix within the distillery segment should improve profitability in H1FY25 even as volume may be lower, believe analysts at Elara Capital.

Shares of Balrampur Chini Mills hit an over seven-month high of Rs 460, gaining 4 per cent on the BSE in Tuesday’s intra-day trade on positive outlook. The stock of the sweetener company has bounced back 31 per cent from its previous month low of Rs 352.05 touched on June 4.

Currently, Balrampur Chini Mills trades at its highest level since December 6, 2023. It had hit a 52-week high of Rs 485.80 on November 30, 2023; while, it touched a record high of Rs 525.70 on April 8, 2022.

Balrampur Chini Mills stands as a frontrunner among India’s leading sugar mills. The company operates as a fully integrated sugar producer, boasting substantial involvement in sugar, ethanol and power co-generation.

 

India’s sugar production in marketing year (MY) 2023-2024 (October to September) is expected to reach 32 million metric tonnes. Sugar production in MY 2022-23 was 32.8 million tonne as adverse weather conditions in Maharashtra during the vegetative growth stage led to a significant drop in cane yields following consecutive seasons of record yields.

India’s sugar exports in MY 2023-2024 are estimated to be negligible as the Indian government could maintain tight export controls to prevent any domestic shortages or price fluctuations during the national election year.

Sugar consumption in the year is expected to continue its upward trajectory and reach ~28.7 million tonnes as India’s ethanol and potable alcohol industries support growing demand of sugarcane and derivatives.

According to FAS New Delhi, India’s sugarcane planted area for MY 2023/2024 is expected to slightly increase to 5.6 million hectares and production to reach to 32 million tonnes following the significantly strong crushing tail in Maharashtra and Karnataka. Despite the increased potential on account of adverse weather conditions from the El Niño weather phenomenon, the Indian government’s market price supports and augmented diversion of sugar to both ethanol and potable alcohol production will ensure sugarcane remains as the most remunerative crop for farmer, Balarampur Chini Mills said in its FY24 annual report.

Meanwhile, analysts at Elara Capital reiterated 'Buy' rating on Balrampur Chini Mills with a target price of Rs 519 based on 9.5x FY26E blended EV/EBITDA.

The brokerage firm believes the worst is over for Balrampur Chini Mills and circumstances should normalize hereafter. Higher sugar realization and better feedstock mix within the distillery segment should improve profitability in H1FY25 even as volume may be lower. With adequate sugar stocks in India, analysts expect resumption of ethanol-blending program as was the case until Sugar Season (SS) 23.